Wednesday, May 19, 2010

Quaker Oats-Brand Analysis

The changing lifestyle of the Indian populace has been pivotal in the success of many atypical product categories in the market—Breakfast cereal is one of them. While the success of breakfast cereals in the west is attributed to the vegetarian movement in the late nineteenth century; in India the on-the-go lifestyle & increased demand for ready-to-eat foods kick started this category. Typically breakfast cereal is defined as packaged breakfast food often eaten by mixing with cold or hot milk. The branded breakfast cereal market is currently cornered by cornflakes which form 80% of the product offerings. The remaining 20% is constituted by products like Muesli, Oatmeal, Wheat Flakes etc. The market for Oatmeal has been mostly fragmented in the country in the recent past. However, the launch of Quaker Oats in 2006 lead to the evolution & expansion of oatmeal as an overall category.

Quaker Oats is currently owned by Pepsico’s Friolay division & was bought with the acquisition of Quaker in the year 2001.The positioning of Quaker Oats is mostly on the health plank where the company rides on the health benefits provided by Oat Fiber. Oat as a source of fiber is special in numerous ways. Typically, fibers are classified into 2 types: Soluble & Insoluble. While insoluble fibers act as roughage & ease digestion, Soluble fibers ferment into short chain fatty acids which promote the growth of microbial flora in the gut—thus acting as prebiotics. Oats are one of the richest sources of soluble fibers. Besides, US FDA in the year 1998 concluded (after reviewing 37 human clinical trials) that 3 gm of soluble fibre daily from oats, in a diet low in saturated fat and cholesterol, may reduce the risk of heart disease. Consequentially products containing oats were allowed to make health claim on the label. This became a definite unique selling point (USP) for Quaker Oats. The company capitalized on the USP of the product by tying up with Apollo Health Clinic-one of the largest organized pharmaceutical retail chains in the country & launching ‘Heart Health Mission’ which plans to raise awareness about risk of heart diseases—this considerably increased the topline for the product.

Quaker Oats offers considerable synergy to the current product line of Fritolay. Tropicana range of juices,Gatrade as well as Aliva crackers also score high on health benefits-thus contributing to Fritolay’s gamut of ‘good food’ products. Quaker Oats also enjoys some by-default benefits. The product is eaten with hot milk which is intrinsic to the eating habits of the Indian populace (Kellogg’s had to face major setback in the Indian market as Indians were used to eating cereals with hot milk while Kellogg’s tasted best with cold milk).Fritolay India is currently importing oats from Australia. Inorder to lower the production costs it ought to save on the import duty & achieve scale of production. This is possible only when the production starts locally. Pepsico has tied up with farmers in the country for contarct farming. However, oats is not a popularly cultivated crop in the country & the company needs to spend significantly in the training of farmers to achieve suitable yields. Also, inorder to increase consumption the company needs to broaden its target population which is currently confined to middle-aged housewives & to some extent ‘indianize’ the product to please the local palate.